Real exchange rate, innovation and economic growth: a comparative analysis for Latin America and Asia
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Abstract
The aim of this paper is to analyze the role of the real exchange rate, compared to non-price competitiveness, on the dynamics of the product. We study, through a fixed effects panel model, the impact of the real exchange rate, productivity, trade and Foreign Direct Investment on Gross Domestic Product (GDP) in 12 Latin American countries and 10 Asian countries during the period 1990-2021. Specifically, we test whether a competitive exchange rate (undervalued) generates positive effects on the economic growth rate. The main results suggest that: 1) variations in the real exchange rate generate limited and inconclusive effects on GDP; 2) an improvement in productivity and competitiveness generates an expansion of economic dynamics; 3) economic openness has a positive impact, particularly among Asian countries, on economic performance.
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References
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